Standard Bank’s big conflict of interest as top 5 SA banks lag in climate risk race

Just Share’s newly released report, How Cool is Your Bank, details potential conflicts of interest for Standard Bank Group directors. Picture: Armand Hough/ Independent Newspapers

Just Share’s newly released report, How Cool is Your Bank, details potential conflicts of interest for Standard Bank Group directors. Picture: Armand Hough/ Independent Newspapers

Published Nov 21, 2023

Share

Standard Bank has seven directors that have potential conflicts of interest regarding their roles at fossil fuel companies and the bank’s commitment to managing climate risk issues, says Just Share in a new report that spotlights key roles that the South African financial services industry plays in the global decarbonisation race.

Just Share’s newly released report, “How Cool is Your Bank”, details potential conflicts of interest for Standard Bank Group directors Nonkululeko Nyembezi, who is also an independent non-executive director of Anglo American, and Jacko Maree, who is also an independent non-executive director of the Phembani Group Limited.

Other directors of Standard Bank that have potentially conflicting roles at other fossil fuel companies include Trix Kennealy and Nomgando Matyumza who are both independent non-executive directors at Sasol Limited; and Geraldine Fraser-Moleketi, lead independent director of coal miner Exxaro Resources Limited. Xueqing Guan, the board secretary of the Industrial and Commercial Bank of China (ICBC), and Li Li, a non-executive director of ICBC Standard Bank Plc and chief representative officer of ICBC Africa, have also been cited as having possible conflicts of interest with the bank’s commitments to managing climate-related risks.

“Although links with other financial institutions were generally excluded from the definition of a climate conflict, the ICBC is a special case given its significant shareholding in Standard Bank and its known role as a major player in financial facilitation for the oil and gas sector in Africa,” the report by Just Share said.

For Nedbank, the “How Cool is Your Bank” report cites Stanley Subramoney, who is also independent non-executive director at Sasol, as being potentially conflicted. Neither Standard Bank nor Nedbank “disclosed what steps, if any, are taken to manage” these potential conflicts, the report said.

Just Share looked at the top 5 South African banks, evaluating their commitments and scoring on key indices that painted a clearer picture of the bank’s commitment to decarbonisation through their funding activities and governance metrics.

It found that Absa and Standard Bank lagged significantly in this scoring, largely because of their poor performance in the categories for emission reduction targets and governance and strategy. However, even though Nedbank scored 60%, the report noted that none of the top 5 South African banks “is tackling climate risk robustly” when assessed against the goals of the Paris Agreement.

Nedbank explicitly excluded its lending to Eskom from its disclosures, without providing any explanation as to why it had done so. Absa also explicitly excluded Eskom from its “sensitive sector financing caps”, a situation that Just Share said meant that “all future limits on its financing of fossil fuels” would exclude lending to Eskom.

However, Absa disclosed its exposure to “electricity, gas and water supply, excluding renewables”, which saw it attain a better scoring than its bigger rivals.

“Financial institutions have an integral role to play in determining whether or not the goals of the Paris Agreement are met. Through their lending, investment and underwriting, banks can either exacerbate the climate emergency, or play a leading and constructive role in urgently reducing greenhouse gas (GHG) emissions and financing the transition to a low-carbon, inclusive economy,” the report said.

Although the top 5 South African banks have adopted policies that exclude financing of new coal-fired power generation, there has been little progress in relation to gas-fired power generation.

Investec had a nominal score for having a qualified exclusion for coal mining. The finance institution excludes financial services to new thermal coal mines outside of South Africa and to new clients that export thermal coal, and, since March 2023 also excludes limited recourse project financing for new thermal coal mines regardless of jurisdiction.

Absa, FirstRand and Standard Bank had increased financing to fossil fuels by more than 30% in the reporting year while Investec is the only bank that has decreased its overall financing to fossil fuels, by approximately 32%.

Lending to renewable energy projects makes up more than 50% of energy financing for Absa, Investec and Nedbank as well as 35% for FirstRand.

“It is encouraging to see significant levels of financing for renewable energy from South African banks, reinforcing the fact that renewables – particularly wind and solar – are now the cheapest forms of electricity generation, as well as being essential to limit the worst impacts of climate change,” noted the report.

Standard Bank reported that it had mobilised as much as R54.5 billion in sustainable financing, although its total loans and advances amounted to as much as R1.4 trillion. This means that Standard Bank’s sustainable finance “only makes up 3.89% of its total” loan book.

FirstRand also reported that it “facilitated R26.4bn in sustainable and transition finance” during the 2022 financial year. However, according to Just Share, it was not possible to determine the significance of this as FirstRand did not report what its total book was for the period.

“Absa and Investec have not reported the total rand amount loaned to activities which they categorise as sustainable finance.”

BUSINESS REPORT